The New York Court of Appeals held on March 24 in Penguin Group USA Inc. v. American Buddha, 2011 WL 1044581 (N.Y. March 24, 2011) that when determining long-arm jurisdiction, a different analysis applies to online copyright infringement than other forms of copyright infringement. The long-arm statute allows jurisdiction over persons who commit tortious acts outside the state that result in injuries within New York if the other grounds for jurisdiction are found.

The suit arose when New York publisher Penguin Group brought suit against American Buddha, an Oregon nonprofit that published complete copies of five Penguin Group works on two separate web sites. The suit was brought in New York and appealed to the U.S. Court of Appeals for the Second Circuit. Recognizing a split of authority in New York district courts regarding the application of the long-arm jurisdiction statute in two copyright infringement cases against out-of-state defendants, the Second Circuit certified a question concerning the statute to the New York Supreme Court. The long-arm statute allows jurisdiction over persons who commit tortious acts outside the state that result in injuries within New York if the other grounds for jurisdiction are found.

The certified question was: In copyright infringement cases involving the upload of a copyright printed literary work onto the Internet, is the situs of the injury for purposes of determining long-arm jurisdiction … the location of the infringing action or the residence or location of the principal place of business of the copyright holder? The court found the location of the copyright holder determines that a tortious act occurred in New York.

The convergence of two factors persuaded the New York court that an in-state injury has occurred when a copyright owner’s printed literary work is uploaded without permission onto the Internet for public access. First, the digital environment poses a unique threat to the rights of copyright owners, because digital technology enables pirates to reproduce and distribute perfect copies at virtually no cost at all to the pirate. An intended consequence of those activities creates an instantaneous availability of those copyrighted works on American Buddha’s web sites for everyone, in New York or elsewhere, with an Internet connection to read and download the books free of charge. Despite the fact that the electronic copying and uploading of the work was apparently undertaken in Oregon or Arizona, where American Buddha servers were located, the harm was spread across the country.

In the case of online infringement, identifying the situs of the injury is not as simple as looking to the place where the plaintiff lost business. Here, the place of uploading is inconsequential, and it is difficult, if not impossible, to correlate lost sales to a particular geographical area.

Secondly, the situs of the injury derives from the unique bundle of rights granted to copyright owners. The five exclusive rights of copyright embody an overarching right to exclude others from using a copyright holder’s property. An owner whose copyright is infringed suffers more than an indirect financial loss; it diminishes the publisher’s incentive to publish and the harm is often characterized as irreparable in light of possible consumer confusion.

The court was quick to point out that its decision does not open up Pandora’s box allowing any party accused of digital copyright infringement to be haled into a New York court when the plaintiff is a New York copyright owner of a printed literary work. Rather, the long-arm statute requires a plaintiff to show that the copyright owner both expects or should reasonably expect the act to have consequences in the state and derive substantial revenue from interstate or international commerce. There also must be proof that the out-of-state defendant has requisite minimum contacts with the forum state and that the prospect of defending a suit there comports with traditional notice of fair play and substantial justice.

The New York Supreme Court in a reasoned analysis extended existing case law to hold that the diffused nature of the harms associated with online copyright infringement warrants a different analysis under the state’s long-arm jurisdiction statute than is required for offline copyright infringement. This reasoned decision is likely to be adopted by additional courts in deciding whether a state’s long-arm statute should apply to infringement that occurs by use of the Internet. This holding will make it easier for copyright owners to pursue infringers in their home court, and viewed from the infringer’s standpoint, infringement on the Internet subjects the infringer to suit in the copyright owner’s backyard.